STEVEN HENRY
WOLF, GREENFIELD & SACKS, P.C.
MR. HENRY: Thank you, Mr. Commissioner and distinguished panel
members. I'd like to begin my comments just by stating who I am.
I'm a patent attorney in a large intellectual property firm, ap-
proximately forty_five professionals, about half of whom deal
with the computer industry, hardware and software. We have con-
siderable experience ur client's experiences on all sides of
these matters.
To back into my remarks, I am a strong advocate of the patent
system and I have seen it work time and again in the software in-
dustry as well as other industries. I have seen no fundamental
differences in the software industry other than tentativeness in
applying the existing rules, and the problems that other speakers
have addressed with respect to the ability of examiners to get at
the prior art, which is indeed a serious problem. I don't be-
lieve the software industry operates under substantially dif-
ferent economic principals than any other industry, or that the
people in that industry are driven by a different human nature.
Professor Hollaar addressed many of the points, made many of the
recommendations that I would like to make to this body, and I
certainly endorse what he said. I'd like to, before proceeding,
go one step further and address a topic or two that he did not
address, and specifically the issue of reexamination as a cure
for defve examination in the first place. If one looks at the
statistical studies that have been done of reexamination, and one
takes into account the kind of anecdotal experiences that we have
had, reexamination is tilted in favor of supporting the conclu-
sions originally reached by the Patent and Trademark Office, not
through any intentional bias, but that's what the statistics in-
dicate; and number two, it is severely limited and was intention-
ally limited when it was fashioned, limited to consideration of
patents and printed publications. The problems of examiners not
understanding what they're looking at not addressed, the oppor-
tunities for testimony are not provided. If one has an
initially_weak examination and it is then reinforced by a faulted
reexamination system, we've compounded the problem; we haven't
addressed the problem. Though it takes money principally to free
up manpower to hold hearings and to broaden proceedings, I be-
lieve that there is no cure for the problem other than the money,
the time ahe increased training.
In written remarks we will address the overall legal and theoret-
ical issues raised in your Notice. I'd like to take a few minutes
to talk about some practical, anecdotal experience.
COMMISSIONER LEHMAN: Can I ask a question? You know, you're
talking about the money that would be involved and the change of
procedure that would permit us and maybe encourage us to take
oral testimony and to get at nonwritten prior art, but to some
degree __ life is not, you know, totally fair, but to some de-
gree, and I assume that would partly be on the motion of the par-
ties seeking reexamination if you wanted to have reexamination
just on the basis if you couldn't afford, for example, to support
coming to Washington, getting witnesses there and so on and so
forth, you could still go forward with the written record. I mean
it's not automatically implying a greater burden, financial bur-
den for everybody.
MR. HENRY: Certainly the requester could go on a written record
if the requester so desired.may well be that the Commissioner
should consider some way of developing a fund wherein if the exa-
mining group thought it would be appropriate to have a hearing of
some sort, and the requester is not able to bear that expense,
that there may be other resources brought to bear to be able to
fly appropriate witnesses in. Because I think faith in the sys-
tem is something that's extremely important and right now that's
what's lacking. It's lacking in part because of media attention
on a few glaring mishaps in the system, they're not the rule,
they are the exception, but it so happens that the exception gets
the attention.
To turn to some of the times we've seen the system work, I'll try
to give a synopsis of a few experiences, hopefully without iden-
tifying the companies. In our first case I have a client that's a
small software company on the West Coasts, initially financed
through the founder's own resources. This is a utility type of
software, improving hardware performance and reliability. They
filedatent application; a hardware company that they were working
with decided to flex its muscles a bit and threatened to design
their own product, notwithstanding the patent application. How-
ever, once we had an indication of reasonable allowable claims we
were able to negotiate them back into the fold.
A few months later, despite the success of the product, as we all
know, it's extremely expensive to get software into the market-
place and marketing expenses were just eating up the company's
cash.
The company went to look for investors. Every single investor re-
fused to get actively involved until knowing that there would be
strong patent protection, because the one thing that makes
software unique is how easy it is to copy. And I'm not using
copy necessarily in the copyright sense, but analyzing it and
taking what's there.
This was a situation where fortunately the system and some public
servants in the patent and trademark office, very sensitive to
issues such as this, responded and dealt expeditiouslth the
response we had filed to an outstanding action, and indeed al-
lowed very broad claims, and our client is at this point closing
the financing which was the difference between life and death for
the company.
We represent university clients also. Universities will generally
not be able to license their technology unless they have chances
of protecting it. They are not known to be litigious; it is out
of respect for the patent system and access to future technology
generally that a licensee signs up. We've seen a number of in-
stances where software developed at universities was licensed by
the very developers who knew the potential, went out, formed
their own companies, and that was a revenue stream that was
formed back to universities; and that revenue stream is very im-
portant.
We have investors come to us, any number of times, thinking of
investing in software_related companies, and their question again
is, "Is this protectable? If I'm going to put in my millions and
millions of dollars and all ofeffort, will someone else be able
to come along and walk off with it?"
In those situations where our own investigations of prior art or
the Patent Office investigations of prior art make it question-
able that strong protection is available, generally an investment
is not made. Where, however, it appears that protection is avail-
able, an investment often is made. We don't want investors to
start getting gun_shy about investing because subsequently we
find out that the examination __ search process in particular __
is defective. The best thing we can do at this point is every-
thing reasonably possible to beef up that process.
That will have carryover effect, as Professor Hollaar mentioned,
with respect to the copyright system. The copyright system is
drawing a great deal of fire because of the look and feel and its
progeny and uncertainty. Investors and business people look for
certainty, and it's our job to move the system in the direction
where they feel a lot more comfortable with it.
Thank you.
CO SIONER LEHMAN: Thank you very much.
Basically it's been your testimony, and it's very strong, that in
your experience representing clients you've seen a number of very
specific examples where investment in innovation would not have
occurred had it not been for the patent incentive.
MR. HENRY: Absolutely.
COMMISSIONER LEHMAN: Thank you very much.
Next I'd like to call Sal Cassamassima, General Counsel of the
Exxon Production Research Company.